December 23, 2011

State Auto Insurance Laws That Are Affecting Rising Insurance Costs

Rising insurance costs have made it expensive for U.S. drivers to stay on the road. Unfortunately, insurance premiums will probably continue to rise over the next year, partially due to new state auto insurance laws and traffic laws. State insurance regulations and driving laws have always had a tremendous impact on insurance companies, and several new laws have either made it more expensive for insurance companies to do business or easier for insurers to penalize poor drivers.

One example is the new wave of distracted driving laws, which have been almost unanimously supported throughout the insurance industry. Distracted driving laws levy fines against drivers who send text messages or check their phones while driving. As insurance companies look at drivers' records when setting insurance rates, some of the increase in the average cost of car insurance over the last year can be attributed to these new laws. However, insurance companies frequently point out that the net effect of distracted driving laws is positive, as they make roads safer, and drivers who aren't caught driving dangerously will eventually see lower auto insurance rates. In any case, distracted driving laws are unlikely to go away anytime soon. Even states with relatively lax traffic laws like New Hampshire have adopted laws aimed at drivers who text with their cell phones while they're on the road.

Other states are adopting measures that could prevent car insurance companies from offering certain types of discounts. California and other states are looking into laws that prevent "loyalty discounts," which some lawmakers have called unfair. Loyalty discounts are offered to drivers who have kept their car insurance companies with the same provider for a certain amount of time, usually several years. Opponents of the discounts argue that they're used to compel drivers to stay with their insurance companies and amount to discriminatory pricing. Other states already have laws that limit other types of discounts or ban them outright. Banning car insurance discounts certainly has an effect on insurance rates and can lead to rising insurance costs for many drivers, although the extent of this effect can vary depending on the exact focus of the legislation.

Drivers should know their state auto insurance requirements and traffic laws, as this can make it easier to avoid rising insurance costs. It's also important to shop around before purchasing a new insurance policy, especially after new state auto insurance laws have taken effect. Drivers should collect quotes online and compare rates carefully to find the best possible premiums for a given amount of coverage. This is the best tactic for limiting costs and avoiding a relatively large auto insurance bill.